Why might Aussie giant Telstra want to buy Digicel Pacific?

Why might Aussie giant Telstra want to buy Digicel Pacific?

Australian communications and technology giant Telstra Corp Ltd has said that it is in talks to buy the Pacific operations of telecommunications firm Digicel Group – in partnership with the Australian government.

Digicel Group Holdings is active in 32 markets in the Caribbean, Central America and Asia Pacific. Digicel’s Pacific operations include Papua New Guinea, Fiji, Samoa, Vanuatu and Tahiti. According to Reuters, Telstra has said that the government would finance the bulk of any bid.

Digicel’s Pacific business may well be a reasonably attractive proposition, given that it is the major telecommunications player in the Pacific region. But such a deal could also be complicated, involving multiple operators and governments. So why is Telstra apparently keen? And why might the Australian government want to get involved?

The clue may be in last year’s reports, denied by Digicel, that it had plans to sell its Pacific business to state-owned China Mobile. This would worry Australia, which regards Digicel as a strategic asset that it does not want to see handed over to China.

In addition, Australia has increased its presence in the Pacific recently through the creation of a A$2 billion ($1.5 billion) infrastructure financing facility. It’s also a member if the so-called Quad group, together with the United States, India and Japan, which aims to counter China’s expanding interests in the Indo-Pacific.

Thus Telstra  seems to be able to rely on Australia taking on some of the financial and strategic risk management support involved. In fact, Australian media reports suggest a deal would be worth about A$2 billion ($1.5 billion), with the Australian government paying around A$1.5 billion.

However, Telstra has insisted to local Australian press that this is not yet a done deal.

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